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Monday, August 15, 2011

Preparing For the Next Shock

Jack Wood

What began as a financial crisis four years ago has now developed into a full-blown fiscal crisis in the rich nations. The wild gyrations in the global stock markets this month are enough indication that the tentative optimism evident in the first half of this year has been replaced by a new round of fear..…..
The US, Germany, France and the UK seem to be further away from insolvency than the likes of Greece and Portugal, despite the fiscal strain they are facing, but economic conditions have deteriorated even in these countries in recent months. A double-dip recession at this juncture could also push them closer to the brink. ……..
These deficits are an indication that fiscal policy is very loose and domestic demand has to cool off. The twin deficits are higher than what they were in 2008, during the panic after the collapse of Lehman Brothers....